Tough medicine: Gov. Chris Christie's proposed cap on public worker costs is a must

Tony Kurdzuk/The Star-LedgerGovernor Chris Christie delivers his budget address in the Assembly Chamber March 16, 2010In the long run, the most important move Gov. Chris Christie has made to shrink government is not his cuts to mass transit, or higher education, or even the public schools.

It is his plan to impose a cap of 2.5 percent on annual increases in labor costs and property taxes. That would bend the cost curve for local government in New Jersey for years to come. It offers taxpayers a chance to gain control over a collective bargaining process that has gone off the rails.

Take a hard look at the problem. New Jersey has the nation’s highest paid police officers and firefighters, and our teachers are close behind. They earn significantly more than the typical taxpayer. And most of them are getting healthy raises this year, despite the crushing recession.

Benefits are even more out of whack. It’s not unusual for senior police officers to retire with a cash payment of $100,000 or even $200,000 for unused sick and vacation time, along with a lifetime pension equal to 70 percent of their highest salary. Teachers, coddled by tenure protection for most of their careers, get Cadillac health care plans for life, usually without paying a penny on premiums.

This is plainly not sustainable. Most of these costs are paid for with property taxes, already the highest in the nation. And relieving the pressure with more state aid is not possible. Trenton is broke.

Labor costs make up the bulk of public spending, and the governor knows he can’t deliver on his promise to shrink government without confronting this problem head-on. He has proposed changes in the negotiating rules that will give taxpayers a fighting chance at the bargaining table. But his big gun is the proposed cap on property taxes, and a companion cap on labor costs.

Here it makes sense to look at the wildly different experience of California and Massachusetts.

In 1978 California’s Proposition 13 imposed a rock-hard cap on that wound up wrecking one of the nation’s best school systems. They solved the tax problem at the expense of their kids’ futures.

In 1980, Massachusetts found a smarter way. It placed a 2.5 percent cap on property taxes, but allowed local voters to override that cap in a referendum. About half the referendums seeking more spending and higher taxes have passed.

Yes, some towns have laid off cops and teachers, closed libraries and senior centers, and ended recreation programs. This isn’t magic.

But Massachusetts has protected the essentials, including maintaining one of the nation’s best school systems. Its property taxes, once neck-and-neck with New Jersey’s, are now below average.

Now, for the crucial details. Christie wants to enshrine the cap on property taxes in a Constitutional Amendment. He suggest a statute to establish a companion 2.5 percent cap on labor costs.

The Legislature needs to hear testimony from schools and towns to test whether the 2.5 percent limit is realistic in a day when health costs are rising so rapidly.

Public employees will have to contribute more to their own benefit packages. Beyond that, the goal should be to freeze salaries in the short term, then allow modest increases to keep pace with inflation. Without hitting those marks, property taxes will continue to spiral.

The hearings should also explore way to improve on the Massachusetts model. The chief concern there is that the cap may be hitting working-class towns and cities harder than wealthy suburban towns. The reason is that wealthier towns more often vote to exceed the cap.

Again, the Legislature needs to get into the weeds. If this means that a town like Hoboken can’t afford to build a pool in a new school, that’s fine. If it means a town like Bloomfield has to cheapen its core academic programs, that’s not.

A final word about the governor: We are lucky to have a fighter in this office now, a guy who is willing to take on the public worker unions.

But he is showing a blindness to the issue of wealth and poverty in this state, which is closely tied to the issue of race. His cuts are landing hardest on lower-income families, even as he proposes to lower taxes for the wealthiest 2 percent.

The Legislature needs to guard against that, even as we search for ways to lighten the burden of property taxes.